Customer Capital and Deposit Stability

Customer capital, the value to a company of its relationship with its customers, is particularly important to banks, who rely on customer deposits for capital. Using a large set of customer-initiated reviews, we develop real-time, continuous measures of customer capital at the bank branch level. Exploring the importance of customer capital in the face of non-financial scandals, we find that customer capital helps banks withstand reputational shocks. The effects are stronger for branches located in markets where customers have higher marginal value and for banks specialized in relationship banking. Our findings highlight the value of non-financial disclosures, particularly the information on intangible customer capital, in assessing the resilience of retail banking relationships.